ST Engineering Adapts as MRO Profits Fall

ST Engineering<br><br>After splitting its portfolio into designated commercial and defense divisions in late 2020, ST Engineering announced plans to further push forward its technology initiatives with the formation of a group engineering center aimed at developing new concepts such as smart MRO, autonomous system-of-systems and video analytics.

The aerospace division of Singapore Technologies Engineering suffered a 24% decline in pre-tax profit in the first half of the year, as the company, which is Asia’s leading MRO provider, grappled with the impact of COVID-19.

The fall in first-half pre-tax profit to S$120 million would have been worse without the considerable payroll support provided by Singapore’s government.

“We are cognisant of the ‘tail wind’ afforded us through the various government support schemes for 2020,” said ST Engineering president Vincent Chong, adding: “We do not expect such support beyond this year.”

Within the aerospace division, aircraft maintenance and modifications actually saw a slight rise in pre-tax profit, to S$53 million, but this was outweighed by a fall in component and engine repair and overhaul activity, for which pre-tax profit for the first six months of the year slumped from S$42 million to S$28 million.

Despite these setbacks, ST Engineering is positioning itself to take advantage of some of the opportunities presented by the crisis, notably demand for cabin cleaning and hygiene services, and the booming cargo market.

In the second half of the year it expects to complete its first Airbus A321 passenger to freighter conversion and embark on a hunt for new P2F contracts. It has also bolstered its liquidity by selling 30 spare engines into a securitization structure.

Furthermore, despite the challenging environment the company secured about $1.4 billion of new aerospace contracts during the first half.

These include: a multi-year engine and component MRO contract with T’way Air; a five-year nacelle maintenance contract with Qantas; a three year heavy maintenance contract for Alaska Airlines’ A320 fleet; and a two year heavy maintenance contract from an Asian carrier’s 40 CFM56-7B engines.